1. (a) Sales or use tax is not due when an interest in tangible personal property is sold to a purchaser who, either before or after the sale, owns a joint or undivided interest in the tangible personal property with the seller.

2. (b) In order for the sale to be exempt, the following requirements must be met.

   1. (1) The seller must have paid sales or use tax on the tangible personal property when it was purchased.
   2. (2) The sale must be made pursuant to the terms of a good faith contractual relationship between the seller and the purchaser. Good faith contractual relationship means a legal relationship established between two or more persons created for considerations other than the avoidance of the limited sales and use tax.
   3. (3) It is necessary that the purchaser, either before or after the sale, own a joint or undivided interest in the property with the seller. The joint ownership transfer exemption does not apply to sales between related corporations or other entities where the only joint ownership is the ultimate ownership of the corporation stock.
3. (c) Items which are sold by a joint research and development venture as defined by 15 United States Code §4301 to a participating entity in connection with the venture are exempt from sales and use tax.

4. (d) Intercorporate services.

   1. (1) Sales or use tax is not due on charges for taxable services between affiliated corporations which qualify to report their income to the Internal Revenue Service on a single consolidated return with other members of the affiliated group for the tax year in which the taxable service is provided.
   2. (2) For the purposes of this subsection, "affiliated corporation" includes a corporation that would be classified as a member of an affiliated group under 26 United States Code §1504 but for the exclusion provided by that section.

   3. (3) The exemption provided by this subsection does not apply to sales of tangible personal property between affiliated corporations. Neither does the exemption apply to services that were taxable before September 2, 1987. Services that were subject to sales and use tax before September 2, 1987, and which are taxable when provided among affiliated entities, include:

      1. (A) amusement services;
      2. (B) cable television services;
      3. (C) personal services;
      4. (D) motor vehicle parking and storage;
      5. (E) the repair, remodeling, maintenance, or restoration of tangible personal property. (See the exception in the Tax Code, §151.0101(a)(5)); and
      6. (F) telecommunications services.
   4. (4) Tangible personal property that is transferred as an integral part of a service exempted under this subsection may not be purchased for resale by the providing company.
   5. (5) Services that are exempt from sales tax under this subsection may not be purchased for resale by the providing company.
   6. (6) When a contract contains charges for taxable items and charges for services that qualify for exemption under this subsection, the total charge will be taxable unless the charge for taxable items is separately stated to the customer.

Source Note:The provisions of this §3.331 adopted to be effective March 18, 1988, 13 TexReg 1146; amended to be effective February 10, 1993, 18 TexReg 590.